WASHINGTON, D.C. — More tipped workers will be able to claim a federal tax deduction under finalized rules defining which jobs qualify and what counts as a “tip,” the Department of the Treasury and Internal Revenue Service announced Friday.
What This Means for You
- More than 70 types of workers—from bartenders to delivery drivers—may qualify for a tax deduction on tips
- Only certain payments count as “qualified tips,” including cash and card payments given voluntarily by customers
- Self-employed workers can qualify, but their deduction is limited to their net income
The final regulations implement the “No Tax on Tips” provision in the One, Big, Beautiful Bill, allowing eligible workers to deduct certain tip income from their federal taxes. A tax deduction reduces the amount of income subject to taxation, lowering a worker’s overall tax bill.
The rules establish a formal list of tip-earning occupations and define “qualified tips”—the specific payments workers can claim under the deduction.
“Taxpayers are already benefiting from No Tax on Tips since the IRS already is issuing refunds to eligible workers,” IRS Chief Executive Officer Frank J. Bisignano said. “Given the wide variety of workers who receive tips, these final regulations help implement an important tax benefit for American workers.”
Who Qualifies
The final rule identifies more than 70 occupations eligible for the deduction, organized under a new Treasury classification system that assigns three-digit codes to job categories.
Those categories include:
- Beverage and food service
- Entertainment and events
- Hospitality and guest services
- Home services
- Personal services
- Personal appearance and wellness
- Recreation and instruction
- Transportation and delivery
The IRS expanded the list from earlier proposals to include visual artists and floral designers under personal services, and gas pump attendants under transportation and delivery.
What Counts as a “Qualified Tip”
To claim the deduction, workers must receive “qualified tips,” defined as voluntary payments from customers rather than mandatory charges.
Eligible tips include payments made in cash or cash-equivalent forms such as credit or debit cards, checks, gift cards, or mobile payment apps.
Tips must come directly from customers or through tip-sharing arrangements, such as pooled tips among staff. However, mandatory service charges—fees automatically added to a bill—generally do not qualify unless customers can change or remove them.
For example, if a restaurant adds an automatic 18% charge to large-party bills and customers cannot adjust it, those payments do not count as qualified tips, even if distributed to staff.
Reporting Requirements and Limits
Workers can only claim the deduction on tips that are officially reported to the IRS. This includes income listed on forms such as W-2 for employees or 1099 forms for independent contractors, as well as tips workers report themselves.
Self-employed and gig workers may also qualify if their occupation appears on the IRS list and they meet all requirements. However, their deduction is capped at their net income, meaning they cannot deduct more in tips than they earned overall from their business activities.
Next Steps and Background
Treasury and the IRS said the final regulations reflect feedback from more than 300 public comments and a hearing held in October 2025.
Additional details on the provision are available on IRS.gov under the One, Big, Beautiful Bill section.
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